Bitcoin may “totally collapse” though it may linger for a century, Nobel Laureate Robert Shiller said, who equaled it to the Tulip mania.
“[Bitcoin] might totally collapse and be forgotten and I think that’s a good likely outcome but it could linger on for a good long time, it could be here in 100 years,” the Yale University professor said to the American Tv station CNBC in an interview in Davos, Switzerland.
“It reminds me of the Tulip mania in Holland in the 1640s…,” he said.
Tulip mania saw contract prices for some bulbs of the new and fashionable tulip shoot through the roof and eventually collapse in February 1637. In a parallel to the current cryptocurrency boom, speculation and FOMO or the fear of missing out, played a major role in driving up prices of the exotic flower.
Shiller, who was the joint winner of the 2013 Nobel Prize for economics, pointed out that bitcoin has no value at all “unless there is some common consensus that it has value.”
In contrast, assets such as gold would at least have some value even if people did not view it as an investment, the economist added.
The CNBC stated that the interview was conducted ahead of the massive sell-off in cryptocurrencies this week over concerns of possible stringent regulation in South Korea and China.
“The Bitcoin market is a marvelous case study in ambiguity and animal spirits,” Shiller wrote in an op-ed in the New York Times mid-December, when the price of the leading cryptocurrency was approaching its peak of above USD19,800.
A rational appraisal of an asset’s value was simply not possible at present with Bitcoin and the real understanding of the economic issues underlying the cryptocurrency was almost nonexistent, he wrote.
Traditional finance has kept cryptocurrencies at arm’s length, but many investors and bankers are positive about the future for the distributed ledger technology or blockchain that underlies them.
Recently, billionaire investor Warren Buffett warned that cryptocurrencies are set to have a bad ending and he would not bet any money on them.
Jamie Dimon, who is JP Morgan Chase CEO and chairman, regretted calling Bitcoin “a fraud” earlier, but expressed little interest in investing in cryptocurrencies.